Core Insights - The article provides a perspective on stock investments, emphasizing the author's unique insights and knowledge in the field [1] Group 1 - The analyst holds a beneficial long position in the shares of ON and MU, indicating confidence in these stocks [2] - The article expresses personal opinions and is not influenced by compensation from any company mentioned [2] - The analysis is intended for informational purposes and encourages readers to conduct their own research before investing [3] Group 2 - The article clarifies that past performance does not guarantee future results, highlighting the inherent uncertainties in stock investments [4] - It notes that the views expressed may not represent the overall stance of Seeking Alpha, indicating a diversity of opinions among analysts [4] - The article emphasizes that analysts may not be licensed or certified, which could affect the reliability of the information provided [4]

Core Viewpoint - ON Semiconductor is implementing a restructuring plan to reduce its workforce by 2,400 employees, which is expected to generate annual savings of $105 million to $115 million while incurring $50-$60 million in employment-related charges [1][2]. Financial Performance - The company's fourth-quarter 2024 non-GAAP earnings were 95 cents per share, a decline of 24% year over year, with revenues falling 14.7% to $1.72 billion [2]. - ON's stock has decreased by 19.8% year to date, underperforming the Zacks Computer & Technology sector, which saw a decline of 1.6% [2]. Market Dynamics - Sales in Japan declined sharply in the fourth quarter, while China experienced an 18% sequential growth; however, early Chinese New Year and extended shutdowns negatively impacted electric vehicle deliveries, affecting ON's growth prospects [5]. - The company anticipates that ongoing inventory digestion in key markets, particularly automotive and industrial, will continue to impact profitability [2]. Strategic Initiatives - ON's restructuring plan aims to enhance profitability through stringent cost management and capacity planning, which is expected to improve gross and operating margins and generate strong cash flow in the long term [6]. - The company is focusing on growth in silicon carbide technology, particularly in utility-scale solar and battery electric vehicles (BEVs), with expected revenue increases of 40% in 2024 and 50% in aerospace and defense [7]. Acquisitions and Partnerships - ON's acquisition of Silicon Carbide Junction Field-Effect Transistor technology is expected to enhance its energy-efficient power solutions portfolio, particularly for AI data centers and electric vehicles [8]. - Partnerships with companies like BorgWarner and Magna are set to enhance ON's market position in silicon carbide technology, with a lifetime value of $1 billion from the BorgWarner collaboration [11]. Earnings Estimates - The Zacks Consensus Estimate for first-quarter 2025 earnings is 54 cents per share, reflecting a 35.5% decline over the past 30 days and a 41.3% decrease compared to the same quarter last year [12]. - For 2025, the earnings estimate is $2.60 per share, down 35.5% from 2024, with revenues projected at $6.17 billion, indicating a 12.92% decline [13]. Stock Valuation - ON Semiconductor shares are currently considered overvalued, indicated by a Value Score of D, and are trading below both the 50-day and 200-day moving averages, suggesting a bearish trend [15][16]. - The company plans to rationalize its manufacturing footprint and reduce excess capacity, which is expected to lower fixed costs and positively impact profitability by late 2025 [17].

Core Viewpoint - ON Semiconductor Corp. has experienced a significant decline in total revenue, with international revenue trends playing a crucial role in assessing its financial resilience and growth prospects [1][2][3]. Revenue Performance - The company's total revenue for the quarter was $1.72 billion, reflecting a decrease of 14.7% [4]. - Breakdown of international revenues shows mixed results across different regions, impacting overall performance [5][6][7][8]. International Revenue Breakdown - United Kingdom contributed $384.2 million, accounting for 22.30%, which was a surprise decrease of -4.37% from expectations [5]. - Singapore generated $460.2 million, making up 26.72% of total revenue, exceeding expectations by +11.06% [6]. - Other International regions contributed $142.8 million, representing 8.29%, falling short of estimates by -10.14% [7]. - Hong Kong accounted for $453.5 million, or 26.33%, slightly exceeding expectations by +0.58% [8]. Future Revenue Projections - Analysts project revenues of $1.41 billion for the ongoing fiscal quarter, a decline of 24.5% year-over-year, with contributions from various regions expected to be $397.36 million (UK), $405.19 million (Singapore), $153.86 million (Other International), and $427.47 million (Hong Kong) [9]. - For the full year, total revenue is expected to be $6.17 billion, down 12.9% from the previous year, with regional contributions of $1.64 billion (UK), $1.7 billion (Singapore), $646.21 million (Other International), and $1.82 billion (Hong Kong) [10]. Conclusion - The reliance on international markets presents both opportunities and challenges for ON Semiconductor Corp., necessitating close monitoring of international revenue trends to gauge future performance [12].

Core Viewpoint - ON Semiconductor Corp reported a significant decline in fourth-quarter revenues, with analysts providing mixed ratings and price target adjustments amid ongoing demand challenges, particularly in the automotive sector. Financial Performance - Fourth-quarter revenue was reported at $1.72 billion, down 2.2% sequentially and 14.6% year-on-year, missing the midpoint of guidance [2] - First-quarter revenue guidance implies an 18.7% sequential decline and a 24.8% year-on-year decline [3] - Non-GAAP earnings guidance for the first quarter is set between 45 cents to 55 cents per share, lower than the analyst estimate of 91 cents per share [3] Analyst Ratings and Price Targets - Stifel analyst maintained a Hold rating, reducing the price target from $60 to $52 [2] - Roth Capital Partners maintained a Buy rating, cutting the price target from $100 to $60 [4] - Morgan Stanley reaffirmed an Underweight rating, lowering the price target from $52 to $44 [5] - JPMorgan reiterated a Neutral rating, reducing the price target from $88 to $60 [8] - Needham maintained a Buy rating, decreasing the price target from $66 to $57 [10] - Rosenblatt Securities reaffirmed a Neutral rating, slashing the price target from $75 to $49 [12] - Goldman Sachs maintained a Buy rating, reducing the price target from $77 to $64 [14] Market Challenges - The company faces ongoing challenges in automotive EV demand, particularly in Asia, impacting near-term outlook and visibility [4] - A projected 19% sequential decline in revenues for the first quarter is primarily driven by a 25% decline in automotive revenues due to inventory digestion at Chinese customers [6][8] - The sluggishness in the China SiC business and unfavorable pricing dynamics in non-core businesses are contributing to revenue headwinds [9] Strategic Adjustments - ON Semiconductor is managing its inventory and business portfolio to maintain profitability amid demand challenges [4] - The company is pulling out of low-margin businesses due to unfavorable pricing [9][11] - Management is committed to optimizing the manufacturing footprint and business portfolio, with potential for above-average margin expansion post-downturn [14][15]

Financial Performance - ON Semiconductor reported a fiscal fourth-quarter 2024 revenue decline of 15% year-on-year to $1.72 billion, missing the analyst consensus estimate of $1.76 billion [1] - The adjusted EPS of 95 cents also missed the analyst consensus estimate of 97 cents [1] - The company expects first-quarter adjusted revenue of $1.35 billion to $1.45 billion, below the consensus of $1.69 billion, and adjusted EPS of $0.45 to $0.55, below the consensus of $0.89 [2] Market Reaction - ON Semiconductor shares fell 8.2% to close at $47.04 following the earnings announcement [3] Analyst Ratings and Price Targets - Citigroup analyst Christopher Danely maintained a Neutral rating and lowered the price target from $77 to $52 [5] - Morgan Stanley analyst Joseph Moore maintained an Underweight rating and lowered the price target from $52 to $44 [5] - JP Morgan analyst Harlan Sur maintained a Neutral rating and lowered the price target from $88 to $60 [5] - Mizuho analyst Vijay Rakesh maintained an Outperform rating and lowered the price target from $85 to $71 [5] - Needham analyst Quinn Bolton maintained a Buy rating and cut the price target from $66 to $57 [5] - Rosenblatt analyst Kevin Cassidy maintained a Neutral rating and slashed the price target from $75 to $49 [5]

Core Viewpoint - ON Semiconductor (ON) reported a decline in both earnings and revenues for the fourth quarter of 2024, indicating challenges in its operational performance compared to the previous year [1][2]. Financial Performance - Non-GAAP earnings for Q4 2024 were 95 cents per share, exceeding the Zacks Consensus Estimate by 3.06% but down 24% year over year [1]. - Revenues totaled $1.72 billion, missing the Zacks Consensus Estimate by 2.05% and declining 14.7% year over year [2]. Segment Performance - Automotive segment, which constitutes 59.5% of revenues, generated $1.03 billion, down 8% year over year [3]. - Industrial segment, accounting for 24.2% of revenues, saw revenues decline 16.1% year over year to $416.9 million [3]. - Other segments, making up 16.3% of revenues, experienced a significant decline of 31.1% year over year, with revenues at $280.1 million [3]. Stock Performance - ON shares fell over 7% at the time of reporting, with a total decline of 36.7% over the past 12 months, contrasting with a 20.7% return in the Zacks Computer & Technology sector [4]. Detailed Quarter Insights - Power Solutions Group revenues were $809.4 million, contributing 47% to total revenues, down 16.2% year over year [5]. - Analog & Mixed Group revenues were $610.6 million, representing 35.4% of revenues, and declined 18% year over year [5]. - Intelligent Sensing Group revenues were $302.5 million, accounting for 17.6% of revenues, with a slight decline of 1.7% year over year [5]. - Non-GAAP gross margin contracted by 140 basis points to 45.3% [5]. Operating Expenses - Non-GAAP operating expenses increased by 4.9% year over year to $321.3 million, with operating expenses as a percentage of revenues rising by 350 basis points [6]. - Non-GAAP operating margin was reported at 26.7%, down 490 basis points year over year [6]. Balance Sheet & Cash Flow - As of December 31, 2024, ON Semiconductor had cash and cash equivalents of $2.69 billion, up from $2.47 billion as of September 27, 2024 [7]. - Total debt remained unchanged at $3.35 billion [7]. - Cash flow from operations for Q4 2024 was $579.7 million, an increase from $465.8 million in the previous quarter [7]. - Free cash flow was reported at $264.8 million, down from $304.1 million in the previous quarter [8]. Q1 Guidance - For Q1 2025, ON Semiconductor expects revenues between $1.35 billion and $1.45 billion [9]. - Non-GAAP gross margin is projected to be in the range of 39-41% [9]. - Non-GAAP operating expenses are anticipated to be between $313 million and $328 million [9]. - Non-GAAP earnings are expected to range from 45 cents to 55 cents per share [9]. Zacks Rank & Comparisons - ON Semiconductor currently holds a Zacks Rank 4 (Sell) [11]. - Comparatively, Arista Networks (ANET) and Twilio (TWLO) have a Zacks Rank 1 (Strong Buy), while DoorDash (DASH) has a Zacks Rank 2 (Buy) [11].

Financial Data and Key Metrics Changes - For the full year 2024, the company reported a non-GAAP gross margin of 45.5% against revenue of $7.1 billion, with fourth-quarter revenue of $1.72 billion and a non-GAAP gross margin of 45.3% [10][26][35] - Non-GAAP earnings per share for Q4 was $0.95, down from $1.25 in Q4 2023 [37] - Free cash flow for the full year was nearly $1.2 billion, with Q4 free cash flow increasing 39% sequentially to $422 million [26][31] Business Line Data and Key Metrics Changes - Automotive revenue increased 8% sequentially to $1.03 billion, driven by growth in China [10][32] - Industrial revenue decreased 5% sequentially to $417 million, with weakness in traditional segments [15][32] - Revenue for the Power Solutions Group was $809 million, down 2% quarter over quarter, while the Analog and Mixed Signal Group revenue was $611 million, down 7% [34] Market Data and Key Metrics Changes - Regional revenue declined sequentially except for North America, which remained flat, while Japan saw the sharpest decline [11] - In Europe, EV demand weakened in Q4, with new vehicle registrations dropping 10% month over month in December [15] - The company noted ongoing inventory digestion across key end markets, impacting demand [11][14] Company Strategy and Development Direction - The company is focused on intelligent power and sensing technologies, with investments in high-growth megatrends such as automotive, industrial, and AI data centers [9] - The acquisition of Corbus Silicon Carbide junction field-effect transistor business aims to enhance the company's silicon carbide offerings [19] - The company plans to rationalize its manufacturing footprint and reduce excess capacity through its Fabrite strategy [28] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about demand volatility due to geopolitical uncertainties and inventory digestion across key markets [11][14] - The company anticipates a challenging first quarter in 2025, with automotive revenue expected to decline by 25% sequentially [58] - Management remains committed to long-term strategic goals despite current market conditions, focusing on operational excellence and innovation [21][24] Other Important Information - The company expects Q1 revenue to be in the range of $1.35 billion to $1.45 billion, with non-GAAP gross margin anticipated between 39% and 41% [41][42] - Capital expenditures for Q1 are expected to be between $110 million and $150 million [45] Q&A Session Summary Question: What is the impact of the current demand drop on ON Semiconductor's specific business? - Management indicated that the significant drop is largely due to the non-core business, which has seen the largest decline, and they will exit this volatile market over time [50][51] Question: What are the expectations for automotive and industrial segment trends in Q1? - Automotive is expected to decline by approximately 25%, while industrial is anticipated to decrease in the mid to high single digits [58] Question: How does the company view the long-term growth in silicon carbide? - Management remains committed to leading the silicon carbide market and aims to maintain high profitability despite short-term volatility [87] Question: What is the company's strategy regarding pricing trends for core products? - Management noted that annual price negotiations have not led to significant price reductions, as they focus on internal efficiencies rather than simply adjusting prices [126][128] Question: How is the company managing inventory levels amid current demand fluctuations? - The company is maintaining discipline in inventory management, ensuring that internal inventory levels remain consistent and not inflated by excess stock [159][160]

Revenue Sources - Sales to the automotive industry represented approximately 55% of total revenue, while sales to the industrial sector accounted for about 25% for the year ended December 31, 2024[111]. - Changes in economic conditions affecting the automotive and industrial sectors could materially impact sales and operating results[111]. Operational Risks - The company faces significant risks related to operational disruptions at manufacturing facilities, which could materially affect production and revenue[93]. - The company relies on a limited number of specialized third-party suppliers, and any disruption in these relationships could adversely impact operations and costs[94]. - The assembly and test operations facility in Leshan, China, may face increased costs due to geopolitical tensions, impacting revenue[115]. - The company is exposed to risks from third-party service providers, which could lead to business disruptions and additional costs[136]. Competition and Market Dynamics - The semiconductor industry requires substantial investment in research and development to remain competitive, and the lengthy development cycle may limit the company's ability to adapt to market changes[104]. - The semiconductor industry is characterized by rapid technological changes, and failure to innovate could result in loss of market share and profitability[105]. - The company’s ability to compete effectively is challenged by significant competition and potential consolidation in the semiconductor industry[106]. - The company may face competitive disadvantages if unable to access government funding or incentives for semiconductor development[109]. Financial Condition and Debt - As of December 31, 2024, the company had $3,379.9 million in outstanding principal related to its indebtedness[151]. - The company may face significant cash flow challenges to meet its debt service obligations, which could adversely affect its financial condition and results of operations[156]. - If interest rates increase, the company's debt service obligations under variable rate indebtedness could rise significantly, negatively impacting net income and cash flows[161]. - The company’s ability to repay its debt is dependent on cash flow generation from its subsidiaries, which may not be guaranteed[160]. - An event of default under any agreement related to the company's outstanding indebtedness could trigger cross defaults, putting pressure on liquidity and financial condition[159]. - The company has approximately $804.9 million in 0% Notes, $1,500.0 million in 0.50% Notes, and $700.0 million in 3.875% Notes outstanding as of December 31, 2024[162]. - The company has a $375.0 million balance in its Revolving Credit Facility, which is subject to interest rate exposure[275]. Environmental and Regulatory Compliance - The company aims to achieve net-zero emissions by 2040, which may involve significant expenditures and operational disruptions[99]. - The semiconductor industry faces increasing environmental regulations that could materially affect the company's operations and financial condition[138]. - Regulatory changes, including tariffs and trade policies, could reduce demand for the company's products and adversely affect sales and profitability[114]. - The company is subject to evolving privacy and data protection laws, which could result in substantial monetary fines and damage to its reputation[133]. - The company faces risks related to compliance with anti-corruption laws, which could result in penalties and harm its reputation[141]. - Regulatory developments related to climate change may incur additional compliance costs and impact the company's financial condition and competitive ability[182]. Technology and Innovation - The company may not be able to develop technology solutions for AI-focused customers in a timely manner, potentially resulting in loss of market share[119]. - The company has made substantial investments in information technology systems, which may involve risks such as operational challenges and increased costs[137]. Currency and Financial Market Risks - Currency fluctuations and foreign exchange regulations could materially affect the company's liquidity and financial condition[124]. - The company is exposed to financial market risks, including changes in interest rates and foreign currency exchange rates, and utilizes derivative financial instruments to mitigate these risks[274]. - Substantially all revenue is transacted in U.S. dollars, while significant operating expenditures are in local currencies, affecting financial results due to exchange rate fluctuations[279]. - A hypothetical 10% change in currency exchange rates could impact operating income by approximately $110.6 million for the year ended December 31, 2024[279]. - The notional amount of foreign exchange contracts was $256.8 million as of December 31, 2024, compared to $262.2 million in 2023[278]. Human Resources and Reputation - The ability to attract and retain skilled personnel is critical, and competition for qualified employees is intense in the semiconductor industry[121]. - Warranty and product liability claims could harm the company's reputation and financial condition if products fail to perform as expected[122]. - Legal proceedings may divert management attention and resources, with potential significant costs associated with defending against litigation[181]. Strategic Decisions and Shareholder Value - The company has provisions in its charter that could delay or prevent acquisitions, potentially decreasing the value of its common stock[171]. - The company’s share repurchase program is not guaranteed to enhance long-term shareholder value and may fluctuate based on various factors[173]. - Strategic acquisitions and integrations carry significant risks, including potential unexpected costs and challenges in aligning operations[174]. - The company may need to issue additional shares of common stock if it cannot refinance or borrow, leading to potential dilution for existing shareholders[158]. - The effective tax rate for foreign-derived intangible income (FDII) is set to increase from 13% to 16% starting in 2026, potentially impacting cash flows[144].

Key TakeawaysON Semiconductor, or Onsemi, posted worse-than-expected results and guidance as it continued to face difficult market conditions.The maker of power chips reported a sales decline in all three of its divisions.Onsemi said the 2025 business outlook "remains uncertain." Shares of ON Semiconductor (ON), also known as Onsemi, sank more than 6% Monday after the maker of power chips missed profit, sales, and guidance estimates as it said it faced difficult macroeconomic conditions. The company posted ...

Core Insights - ON Semiconductor Corp. reported revenue of $1.72 billion for Q4 2024, reflecting a year-over-year decline of 14.7% and an EPS of $0.95, down from $1.25 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $1.76 billion by 2.05%, while the EPS also missed the consensus estimate of $0.98 by 3.06% [1] Revenue Breakdown - Revenue from the Market- Others segment was $280.10 million, significantly below the average estimate of $364.04 million, marking a year-over-year decline of 31.2% [4] - Revenue from the Market- Industrial segment was $416.90 million, slightly below the average estimate of $421.95 million, representing a year-over-year change of -16.1% [4] - Revenue from the Market- Automotive segment reached $1.03 billion, exceeding the average estimate of $975.22 million, but still showing a year-over-year decline of 8% [4] - Revenue from the Product- Intelligent Sensing Group was $302.50 million, surpassing the estimated $275.66 million, but down 1.7% year-over-year [4] - Revenue from the Product- Analog & Mixed-Signal Group was $610.60 million, below the average estimate of $653.82 million [4] - Revenue from the Product- Power Solutions Group was $809.40 million, slightly below the average estimate of $830.92 million, with a year-over-year decline of 25.5% [4] Stock Performance - Shares of ON Semiconductor Corp. have returned -5% over the past month, contrasting with the Zacks S&P 500 composite's +2.1% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]